STOCK MARKETS — TSE shows signs of recovery following bout of Asian flu — Mining sector takes double hit as gold, base metal prices dive

The Toronto Stock Exchange took the same punishment as most of the world’s stock exchanges over the period Oct. 22-27, but rebounded strongly on Oct. 28 to claw back some of the losses. The TSE 300 composite index fell a net 432.46 points over the five trading days, closing at 6,736.31, for a drop of 6.4%.

Trading volume was high throughout the four losing sessions, reaching 122 million shares on Oct. 27, then soaring to 169 million shares as the buyers returned on Oct. 28. On the currency markets, the Canadian dollar went for a rough ride, falling 105 basis points to US71.30cents. Both North American currencies lost ground to the mark, the pound and the yen as offshore funds were cashed out of dollar-denominated stocks.

Gold was off US$9 on the London Metals Exchange, trading at US$313.70 per oz. on the morning of Oct. 29. Silver was down 19cents to US$4.79 per oz., while platinum lost $11, to trade at US$408. Reports that the Swiss central bank had been advised to clear about half of its gold reserves sent the precious metal markets into a panic, with the yellow metal touching US$308.50 per oz. in curb trading — the lowest level since 1985.

The TSE’s gold and precious metals sub-group lost 1,184.39 points, or 15.6%, finishing at 7,595.17. All gold issues were hit hard. Placer Dome was off $3.60 to close at $21.65; Barrick, $2.70 to $29.10; Teck B series, $2 to 24.75; and TVX Gold, $1 to $6.30.

The royalty sisters demonstrated their sensitivity to the gold price, posting the biggest losses among the major issues. Euro-Nevada Mining shed $5.70 to finish at $20.75, while big sister Franco-Nevada Mining fell $4.30 to $32.

The TSE metals and minerals sub-group suffered similarly, falling 453 points, or 10.9% of value, to land at 4,143.87. Nickel favored market watchers with another bellyflop, diving 6cents to trade at US$2.82 per lb. on the morning of Oct. 29. The other base metals each lost 2cents, with lead valued at US26cents per lb., copper at US92cents per lb., and zinc at US55cents per lb.

Inco was down $3.90 to $29. Although the company reported earnings of $5 million for the three months ended Sept. 30, after dividends a net loss of 2cents per share was incurred. This compares with net earnings of $29 million, or 21cents per share, for the same period of 1996. The company blamed its poor performance on increased nickel unit production costs, lower realized base metal prices and lower deliveries of nickel and precious metals.

Down $4.55 on news of lacklustre third-quarter earnings was Falconbridge, which closed at $20.75. The company made $23.5 million, or 13cents per share, during the previous quarter, compared with earnings of $88.7 million, or 50cents per share, in the same period of 1996. Falconbridge’s performance was damaged by a 24-day strike at its Sudbury operations, which cost $18 million, and by payments and expenses related to the proposed transactions with Diamond Fields Resources.

Several other issues suffered with the drop in base metal values. Cominco was down $4.75 to $27.50; Noranda dropped $3.35 to $23.90; and Rio Algom was off $2 to finish at $26.75.

Partners Westmin Resources and Atna Resources took a double whammy after reporting the final results of their 1997 drilling program. Although there was plenty of good news (the discovery of the new Sable zone and the news of wide massive sulphide intersections on the eastern edge of the Wolverine deposit), metallurgical studies on the Wolverine mineralization revealed selenium levels in concentrates that could translate into significant smelting penalties.

Westmin fell $1 to $4.50, while Atna slipped $1.60, or 53%, to $1.45.